IBM has slashed the prices of its business PCs as it faces excess inventory problems and a need to offload the machines into the channel before the end of the quarter.
According to industry insiders, the vendor has found itself caught between the transition from mass production to channel assembly, and needs to clear stock before product releases. In the US, analysts have quoted backlogs of 40 weeks.
The models affected are the Intel-based 166MHz and 200MHz PCs. On 26 March in the UK, Big Blue cut prices of its PC 300 GL and PL business machines by up to 23 per cent.
UK dealers have been offered deals by IBM, but are wary of going on the record for fear of losing the favourable terms being given.
One reseller told PC Dealer: 'Yes, some of us have been offered good deals, and all on separate models so that we can't kill each other on price. We have been able to get a good five to seven per cent on margins.
If we go on the record, it will go somewhere else.'
The fact that IBM was able to offer resellers terms on separate lines pointed to the extent of the backlog problem, one source said.
Terry Earnest Jones, PC analyst at IDC, said: 'Build and configure-to-order is meant to cut out this situation of redundant equipment. I don't know how they've reached this level of product backlog. Intel is pushing the Pentium II at the moment. It goes in cycles, and it's similar to the Compaq situation.'
Steve Brazier, analyst at DataQuest, said: 'Vendors are trying to offload MMX machines due to the transition to PII, and need to get rid of obsolete stock. Currently, Dell is only selling PII machines. It will mean lower cost machines for the user, but probably a price war.'
IBM refused to comment other than to say: 'Compaq's inventory problems are bigger than ours.'
Infrastructure provider says international sales now make up 51 per cent of its revenue
Suzanne Chappell of TMS plans sailing venture after selling Oxfordshire-based TMS to acquisitive Chess
Withdrawal of credit insurance by some providers a 'reflection' of current challenge facing IT sector, according to MD Steve Soper
SMART's UK managing director joins Lenovo to boost SMB business